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FORM DFAN14A
AOL Inc. - AOL
Filed: May 24, 2012 (period: )
Additional proxy soliciting materials filed by non-management
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant �
Filed by a Party other than the Registrant ⌧
Check the appropriate box:
� Preliminary Proxy Statement
� Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2))
� Definitive Proxy Statement
⌧ Definitive Additional Materials
� Soliciting Material Under Rule 14a-12
AOL INC.
(Name of Registrant as Specified in Its Charter)
STARBOARD VALUE AND OPPORTUNITY MASTER FUND LTD
STARBOARD VALUE AND OPPORTUNITY S LLC
STARBOARD VALUE LP
STARBOARD VALUE GP LLC
STARBOARD PRINCIPAL CO LP
STARBOARD PRINCIPAL CO GP LLC
JEFFREY C. SMITH
MARK R. MITCHELL
PETER A. FELD
DENNIS A. MILLER
JAMES A. WARNER
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
⌧ No fee required.
� Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
Source: AOL Inc., DFAN14A, May 24, 2012 Powered by Morningstar® Document Research℠
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� Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date
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Source: AOL Inc., DFAN14A, May 24, 2012 Powered by Morningstar® Document Research℠
Starboard Value LP (“Starboard Value”), together with the other participants named herein, has made a definitive filing with
the Securities and Exchange Commission of a proxy statement and accompanying proxy card to be used to solicit votes for the
election of a slate of director nominees at the 2012 annual meeting of shareholders of AOL Inc., a Delaware corporation.
On May 24, 2012, Starboard Value issued the following press release:
STARBOARD FILES DETAILED INVESTOR PRESENTATION ON AOL INC.
Urges Shareholders to Support Needed Change on the AOL Board by Voting FOR Starboard’s Highly-Qualified Nominees on the
GOLD Proxy Card Today
NEW YORK, May 24, 2012 -- Starboard Value LP (together with its affiliates, “Starboard”), one of the largest shareholders of AOL
Inc. (“AOL” or the “Company”) (NYSE: AOL) with current ownership of approximately 5.3% of the outstanding shares, announced
that it filed an investor presentation yesterday with the Securities and Exchange Commission (“SEC”) in connection with the 2012
Annual Meeting scheduled to be held on June 14, 2012. http://tinyurl.com/StarboardInvestorPresentation
Starboard is urging shareholders to vote the GOLD proxy card to elect its three highly qualified nominees, Dennis A. Miller, Jeffrey
C. Smith, and James A. Warner, in place of incumbent directors Alberto Ibarguen, Patricia Mitchell, and James Stengel, at the Annual
Meeting.
The investor presentation is available at the SEC’s website and can be viewed by clicking the following link:
http://tinyurl.com/StarboardInvestorPresentation
Highlights of the presentation include:
• Starboard’s involvement in AOL over the past 6 months has been constructive and has yielded positive benefits for all
shareholders.
o Prior to Starboard’s involvement with AOL, the Company and its shareholders had suffered through poor operating
and stock price performance since the spin-off from Time Warner.
o During this period, revenues declined twice as fast as operating expenses and EBITDA margins deteriorated
significantly.
o Since Starboard’s first public letter in December 2011, AOL’s stock price has significantly outperformed both the
market and its peers.
o Starboard believes this recent increase in AOL’s stock price is in large part attributable to Starboard’s involvement
with AOL, the recent actions taken in response to Starboard’s involvement, and Starboard’s plans to continue to
significantly increase value at AOL.
Source: AOL Inc., DFAN14A, May 24, 2012 Powered by Morningstar® Document Research℠
• The Company’s reactive changes to date, while a step in the right direction, have largely failed to address the serious
operational issues facing the Company.
o According to Starboard’s analysis and confirmed by recent reports from Wall Street research analysts who cover
AOL, the Display business lost more than $500 million last year alone.
o This business has over $500 million in revenue and, Starboard believes, could be operated profitably if operated
more efficiently.
o From 2009 to 2011, AOL spent approximately $900 million on acquisitions and investments to grow its Display
advertising business, yet enterprise value declined by 59% or $1.7 billion over this period.
o The Display advertising business has not been improving, with an organic revenue decline of 13% from 2009 to
2011, and losses that Starboard believes have increased from $428 million in 2009 to $545 million in 2011 (1).
• Starboard believes its analysis of Patch, which includes a comprehensive study conducted by an independent business
strategy consulting firm, demonstrates that Patch is not a viable business.
o Even at AOL’s target revenue model of selling 80% of ad slots to local advertisers near rate card pricing, Starboard
estimates that Patch would still lose approximately $20 million to $60 million per year.
o AOL’s recently issued revenue guidance of $40-50 million per year in Patch is not satisfactory.
���At a revenue run rate of $40-50 million per year, Starboard estimates that Patch would still lose
approximately $79 million to $133 million per year.
o AOL appears to be pushing ads to Patch that could have been used on other AOL properties to inflate Patch revenue
and justify continued investment.
• Leading independent proxy advisory firms have also expressed serious concerns with AOL’s Peer Group selection and
compensation practices.
o AOL has consistently compared itself to some of the world’s largest companies, many of which seem to not only be
outside of the range recommended by these leading independent proxy advisory firms, but also appear not to be
comparable businesses.
o Starboard believes determining the right peer group is critical because it represents the foundation upon
which compensation planning and relative performance is measured.
o Starboard agrees with the assertion by a leading proxy advisory firm that “Shareholders need to be satisfied that the
peer group is appropriate and not cherry-picked for the purpose of justifying or inflating pay.”
• Starboard’s nominees are highly qualified and have a better plan for enhancing shareholder value.
o Dennis Miller, Jeffrey Smith, and James Warner have strong, relevant experience and are committed to representing
the best interests of all AOL shareholders.
o Starboard’s nominees are committed to working constructively with management and the board to substantially
improve the profitability of AOL’s Display business including a re-assessment of Patch, which, Starboard believes,
is losing approximately $150 million per year.
o Starboard’s nominees would seek opportunities for value creation by exploring alternatives for certain of the AOL’s
assets, including its remaining intellectual property portfolio, its real estate, and capital structure efficiencies.
The full Investor Presentation is available for viewing at: http://tinyurl.com/StarboardInvestorPresentation
About Starboard Value LP
Starboard Value LP is a New York-based investment adviser with a focused and differentiated fundamental approach to investing in
publicly traded U.S. small cap companies. Starboard invests in deeply undervalued small cap companies and actively engages with
management teams and boards of directors to identify and execute on opportunities to unlock value for the benefit of all shareholders.
(1) Display revenue figures from Company filings. Disaggregated Display losses are based on Starboard Value estimates derived from
assumptions including EBITDA margins of 80% for the Access business, 73% for Search, 5.5% for Advertising Network, and 10%
for the Company's Other businesses. These values are derived from conversations with the Company, competitors, Wall Street
research analysts, and Starboard Value internal estimates.
Source: AOL Inc., DFAN14A, May 24, 2012 Powered by Morningstar® Document Research℠
Investor contacts:
Peter Feld, (212) 201-4878
Gavin Molinelli, (212) 201-4828
www.starboardvalue.com
Media Contact:
Daniel Gagnier
Sard Verbinnen & Co.
(212) 687-8080
dgagnier@sardverb.com
If you have any questions, require assistance with submitting your GOLD proxy card or need additional copies of the proxy materials,
please contact:
Okapi Partners
Bruce H. Goldfarb / Patrick McHugh
(212) 297-0720
(877) 869-0171 (toll-free)
_____________________________________
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Source: AOL Inc., DFAN14A, May 24, 2012 Powered by Morningstar® Document Research℠